If Enthusiasm and Optimism Paid Dividends, Saab Would be Thriving

Update: Reality trumps optimism. The District Court in Vanersborg, Sweden, on Thursday rejected Saab Automobile AB's proposal for voluntary reorganization, which would cover Saab Automobile Powertrain and Saab Automobile Tools. "Saab Automobile is disappointed with the ruling and will appeal the District Court's decision," owner Swedish Automobile N.V. said in a press release.

This isn't Ingmar Bergman's "The Seventh Seal," though one could imagine Victor Muller playing a game of chess with Death to save the life of his company. Everyone from the chairman and CEO on down has a tenacious grip on Saab Automobile. The feeling is that if Saab can get the cars rolling out of the factories again, they'll find customers. The reorganization plan filed in Sweden Wednesday morning is not a bankruptcy and has no direct counterpart in U.S. bankruptcy law, says Tim Colbeck, president and chief operating officer of Saab Cars North America. His company, which comes under the umbrella of Saab's parts entity, is not part of the parent's reorganization. It continues to operate and pay its 64 employees.

"There have been no layoffs" at SCNA, Colbeck says, and the company continues to deliver cars and the new 9-4x sport/utility vehicle to 192 U.S. dealers and 14 Canadian dealers. "Our dealerships have an adequate supply at this time," Colbeck says, with "a little more than 3,000" 9-3s, 9-4xs and 9-5s in North American inventory.

U.S. dealers sold 65 Saab 9-4xes last month. That new crossover is on model year changeover, Colbeck says, and so GM's Ramos Arizpe, Mexico, plant is making Cadillac SRXes only, right now. Colbeck could not estimate how long it will be before Saab's Trollhatten assembly plant restarts.

Saab's parent company, Swedish Automobile NV (The Netherlands) filed the "proposed voluntary reorganization," a "self-managed, legal process under Swedish law headed by an independent administrator appointed by the court," working with Saab's management. It took one reorganization to free Saab from GM. It will take another to keep it alive until two Chinese companies can take a majority of Saab's ownership.

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The reorganization period is three months, and can be extended for three-month periods, to a maximum of 12 months. Meanwhile, Sweden's "wage guarantee scheme" pays employees in Trollhatten.

"August salaries are expected to be paid within a short time frame following court approval," Saab says in its press release. The tough part is that while this is going on, Saab must get its suppliers on board to deliver parts.

The company "is confident it will obtain this support, particularly because Saab Automobile aims at full redemption of outstanding debts."

Saab continues to wait for Chinese government approval of auto dealer Pang Da's and small automaker Youngman Lotus' proposed $355.2 million-equivalent, 50-percent investment in the Swedish company. Muller continues to work on obtaining bridge funding to get the company through the reorganization and to its proposed Chinese investments.

Colbeck says he's confident Chinese authorities will approve Pang Da and Youngman Lotus as Saab investors. Though he can't estimate how quickly that will happen, the Chinese regulatory process is making progress. This, despite the obscurity of Youngman Lotus in the Chinese auto industry, and despite Hummer's failure in a similar deal in early 2010. One big difference is that Sichuan Tengzhong Heavy Industrial Machines, which makes heavy equipment and not passenger vehicles, was trying to buy Hummer.

How will Colbeck sell Saabs in North America while the automaker undergoes reorganization in Sweden? He believes the reorganization announced Wednesday will ensure the brand will continue to exist, which should be enough to give Saab customers confidence. He speaks of "the potential of the brand," with the 9-4x just launched, the 9-5 wagon on the way and a new 9-3 in the works. Throw in the 9-1 small car and the 9-6 and 9-7 "prestige" models announced (it's hard to imagine a Saab selling for more than the $40,000-plus 9-5) along with the Pang Da and Youngman Lotus deal in July and, "we're going to have the biggest lineup we've ever had," Colbeck says.

That's vaporware, for now. That's optimism, too. All Saab has are names for three new models, more will than money to build three current models and an agreement for a cash infusion that relies on an obscure Chinese automaker. I hope these prospects are more solid than they appear.